CVR Energy, Inc. (NYSE:CVI) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 2nd of August, you won’t be eligible to receive this dividend, when it is paid on the 12th of August.
CVR Energy’s next dividend payment will be US$0.75 per share, on the back of last year when the company paid a total of US$3.00 to shareholders. Last year’s total dividend payments show that CVR Energy has a trailing yield of 5.4% on the current share price of $55.17. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it’s growing.
View our latest analysis for CVR Energy
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. CVR Energy paid out more than half (74%) of its earnings last year, which is a regular payout ratio for most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 46% of the free cash flow it generated, which is a comfortable payout ratio.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. It’s not encouraging to see that CVR Energy’s earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. CVR Energy has delivered an average of 38% per year annual increase in its dividend, based on the past 7 years of dividend payments.
Final Takeaway
Is CVR Energy an attractive dividend stock, or better left on the shelf? We’re not enthused by the flat earnings per share, although at least the company’s payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. While it does have some good things going for it, we’re a bit ambivalent and it would take more to convince us of CVR Energy’s dividend merits.
Wondering what the future holds for CVR Energy? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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